Chapter 1: What is the latest AI infrastructure deal between Meta and Nebius?
It's another day on the stock market, and we have another massive AI infrastructure deal to talk about. This is Motley Fool Money. Welcome to Motley Fool Money with the Hidden Gems team. I'm John Quast. I'm joined today by Fool contributors Matt Frankel and Rachel Warren. You know, guys, the weekend news was rather thin.
Chapter 2: How does Nebius operate as a neocloud business?
We're going to talk about Dollar Tree's 2025 results in a moment, and we're also going to do some high-level stock picking. ideas, provide some of those thoughts. But the biggest news that we did get this morning was, we did get word that neocloud company Nebius signed an AI infrastructure deal with Meta Platforms. Matt, I want to start with you here.
For listeners who may not be aware, what exactly is Nebius, and how do the economics of this neocloud business work? John, even on lighter news days, it seems like we can always count on some AI infrastructure deal being announced. That's always a good go-to. Nevis, they're a Dutch company, they provide AI infrastructure. Think of them as a landlord for AI computing power.
Chapter 3: What are the details of the partnership between Nebius and Meta Platforms?
They own data centers throughout the U.S., Europe, and Israel, but they're not like a data center REIT. In the sense that they just own the building, they own all the chips inside, the Nvidia chips that are used to train AI models, things like that. They own the storage, they own the hardware, they own all of the stuff that is needed for companies who want to train or deploy AI models.
It rents this as a hardware-as-a-service, I guess you'd call it. Their customers range from small AI startups to massive players like Microsoft, who they also have a deal with. Nebious, they charge their customers for access to their hardware on an on-demand basis.
In other words, the more the customers use their hardware to train their AI models or run AI applications, the more that they're going to pay. It's a capital-intensive model upfront, which is where these billion-dollar deals come in. It involves a heavy capital investment to buy all the equipment, but then it's a very high-margin recurring revenue stream. kind of like a utility almost.
We'll get into the deal specifics in just a bit. But it's not surprising to see companies that have grand AI ambitions and a limited amount of hardware that they currently own to be interested in a partnership like this. And so, Rachel, I want you to walk us through the details of this deal between Nebius and Meta Platforms. On top of that, what is Meta Platforms actually getting out of this?
Chapter 4: How is Dollar Tree adapting to changing consumer behavior?
And why is it that Nebius shareholders seem to enjoy this so much, Nebius stock up today sharply? Yeah, I mean, think of this deal as Meta booking a massive five-year reservation at the world's most advanced digital hotel, right? That hotel is Nebius. And as Matt explained, they're the specialized cloud provider. They build data centers specifically for AI.
So Meta has agreed to pay up to $27 billion to ensure that Nebius, go ahead. to ensure that they have enough computing power to run their future AI models. And then starting in 2027, Nebius will provide Meta with $12 billion worth of capacity. They're going to be using NVIDIA's next-gen Vera Rubin chips.
Chapter 5: What are the financial results reported by Dollar Tree for 2025?
Those are basically the most powerful engines ever built for AI to date. And the deal is a really dramatic expansion of their initial $3 billion partnership they signed late last year. Meta's committed to purchasing up to $15 billion in further capacity from upcoming Nebius clusters. So for Nebius, the deal is life-changing.
The contract's actually worth more than the entire company was valued at yesterday. It also proves that even though they're a smaller neocloud player, they can play in the big leagues with tech giants.
And I think for the market, this deal kind of serves as a massive validation of that neocloud model, where you've got these startups like Nebius that build data centers from the ground up specifically for GPU-intensive AI workloads.
Chapter 6: What trends are influencing consumer spending in retail?
Another thing I'll note, it really solidifies Nebius's position as a critical global player. This is a deal that sits alongside a recent $2 billion investment from Nvidia, a separate $19 billion agreement with Microsoft. Now, what about for meta platforms? For Meta, it's really a strategic move to lock in scarce compute power, ensure that it's not left behind in the AI arms race.
They're chasing these frontier AI models. And this is at a time where they're actually planning significant layoffs. And they're still planning on putting forth a staggering, I think at last count, $135 billion in AI CapEx for 2026. So good news all around, I think this fits very much into Meta's broader strategy that we've been seeing them implement of late. You alluded to it right then.
It's not the only player in the Neocloud space. You have Iren, you have Coreweave. There are many, actually, Neocloud players that are coming more into the investor awareness.
Chapter 7: Why is leadership important when investing in stocks?
I want to ask you, Matt, basically, is this a good place to invest, this Neocloud industry, is this a good place to put some money? Or is there something that you like better that's related to this whole thing that we're talking about with AI infrastructure? I have CoreWeave on my watch list, but I haven't pulled the trigger on it yet. It's a really interesting business.
This is going to be definitely something that's fulfilling a need, clearly, with all these deals. But these are highly volatile stocks. They're very richly valued. They're difficult to evaluate by any valuation metrics that I normally use. My preferred way to invest is the actual data center real estate operators. Digital Realty Trust is a core holding of mine.
Companies like Coreweave and Nebius are tenants of these companies. These are the companies that lease the space. It's not like an on-demand model like Nebius uses. You sign a long-term lease to rent space inside these data centers. They can't build these properties fast enough.
Chapter 8: What are some examples of companies with effective leadership?
Their backlog keeps growing. I think digital realty and Equinix is another big one. Those are my preferred way to invest right now. But then again, I'm the value investor at heart, so that's why I answer it that way. Yeah, I feel like for me personally, this is a really interesting space that I'm watching closely.
But I tend to, in my personal investing approach, go with these bigger tech companies that are operating as the core partners to the nebuses of the world. And I think a lot of that goes back to what Matt was saying. And again, this is my own personal investment approach. I think some of these companies can be difficult to value. I think there are some real questions about some of the
you know, financial, structural integrity there of their balance sheets. So, for me, I tend to approach this still from looking at the Microsofts, the NVIDIAs, the meta-platforms. But there are a lot of ways to approach this space. And I think that what we are going to be seeing more and more moving forward is more fragmentation in infrastructure.
And I think that's going to create a lot of exciting opportunities for investors. When we come back, we're going to take a look at the consumer and its spending trends with a discount retail chain. You're listening to Motley Fool Money. Have you ever gazed in wonder at the Great Pyramid? Have you marvelled at the golden face of Tutankhamun? Or admired the delicate features of Queen Nefertiti?
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Earnings season is winding down, but we did get some financial results this morning from discount retail chain Dollar Tree. It reported its finalized results for 2025. I want to note that this is Dollar Tree here, not Dollar General. Dollar General reported last week
Maybe just before we jump into things in full force, Rachel, can you just walk us through for our listeners, what's maybe the biggest difference between Dollar General and Dollar Tree? Yeah, I think people understandably confuse the two. Dollar General is essentially the leader in rural America. About 75% of their stores are in towns with fewer than 20,000 people.
Dollar General, they function more like a mini Walmart, maybe a rural convenience store where people go for weekly essentials. actually about 80% or more of what they sell is consumables, basically the stuff you use up and have to buy again. Now, Dollar Tree, on the other hand, they're much more of kind of that suburban treasure hunt. They tend to set up shop in strip malls.
They tend to target a much broader range of shoppers. And they have a lot of households in the six-figure range that tend to shop at Dollar Tree looking for things like party supplies, seasonal decor, and other bargains. So those are kind of the core differences. Yeah, you wouldn't expect that six-figure income, but indeed, that is what is going on there with Dollar Tree.
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